Management Memo

National Labor Relations Board (“Board”) General Counsel Jennifer Abruzzo (“Abruzzo”) issued a General Counsel Memo (Memo GC 25-01) last week signaling that employers could face civil prosecution and significant monetary remedies for using non-compete and so-called “stay-or-pay” provisions in agreements with their employees.The new memo, issued on October 7, 2024, builds on Abruzzo’s earlier General Counsel Memo issued in May 2023, where, as we reported, she outlined her belief that nearly all post-employment non-competes violate employees’ rights under the National Labor Relations Act (the “Act”).

Since Abruzzo’s May 2023 memo, employers have witnessed a number of significant developments in this space, including the Federal Trade Commission’s (“FTC”) issuance of a rule in April 2024 banning the use of most non-competes and a subsequent decision by a Texas federal judge blocking that FTC rule. In June 2024, an NLRB Administrative Law Judge issued a ruling in a case involving an Indiana HVAC company finding that non-competes and non-solicitation clauses violate the Act, a decision currently being appealed to the Board.

In her October 7, 2024 memo, Abruzzo again urges the Board to find non-competes with all employees who are subject to the Act’s jurisdiction (nonmanagerial and nonsupervisory employees) to violate the Act except in a few limited circumstances, arguing that such provisions are frequently “self-enforcing” and deter employee mobility. She also advocates for “make whole” remedies where employers are found to have continued to maintain unlawful non-competes. Specifically, the memo argues that merely voiding such provisions is insufficient and that employees should be afforded the right to seek compensatory relief for the “ill effects” that flow from complying with “unlawful non-compete provisions.”

On September 12, 2024, the Regional Director of the National Labor Relations Board’s (“NLRB”) Region 22 in Newark, New Jersey, issued an unfair labor practice complaint against a New Jersey building services company, alleging that employee non-hire (or “no poach”) provisions in the company’s contracts with its building clients violate the National Labor Relations Act (the “Act”).

According to the NLRB’s news release, the complaint alleges that Planned Companies D/B/A Planned Building Services, which is a janitorial, building maintenance, and concierge services provider, “has maintained provisions in its contracts with its client buildings that interfere with, and are inherently destructive of, workers’ rights under Sections 8(a)(1) and (3) of the National Labor Relations Act.”  It further alleges that “Planned Companies restricts its client buildings from soliciting its employees to work for them in a similar job classification for a period of six months after the agreement is terminated, or from hiring employees after they leave Planned Companies’ employment. Any entity retained by the client building to replace Planned Companies is also bound by the hiring restriction.” 

A hearing before an NLRB Administrative Law Judge has been set for November 12, 2024.

In an action brought by Space Exploration Technologies Corporation, commonly known as SpaceX, a U.S. District Court Judge in the Western District of Texas, Waco Division, has declared that the structure of the National Labor Relations Board (“NLRB” or the “Board”) is unconstitutional.

The determination is the basis for an Order granting SpaceX’s motion for a preliminary injunction and enjoining the NLRB General Counsel, as well as the presidentially appointed, Senate-confirmed Board Members and NLRB staff, from proceeding with a scheduled unfair labor practice ...

Since 2015, employers have faced continued uncertainty regarding which standard the National Labor Relations Board (“NLRB” or the “Board”) will apply when determining joint-employer status under the National Labor Relations Act (“NLRA”). Businesses utilizing contractors and staffing firms or operating in partnering arrangements, as well as those engaged in providing temporaries and other contingent workers, have faced a moving target before the Board when it comes to potential responsibility in union recognition, bargaining obligations, and unfair labor ...